Question

In: Finance

A trader is interested in “closing out” a position in a futures market. What is meant...

A trader is interested in “closing out” a position in a futures market. What is meant by the phrase “closing out”? Why can a trader unilaterally close out position in a futures market while a trader cannot unilaterally close out a position in a forward agreement? Provide examples which illustrate the points you are trying to make.

Solutions

Expert Solution

jeff jeffy answered 2 years ago
Next > < Previous

Related Solutions

Explain the advantages and disadvantages to a covered call writer of closing out the position prior...
Explain the advantages and disadvantages to a covered call writer of closing out the position prior to expiration.
- What is the difference between a spot market and a futures market? - What is...
- What is the difference between a spot market and a futures market? - What is the difference between a pure risk and a speculative risk?  
Mark to market a short Eurodollar futures position with June delivery at 104.5 if daily IMM...
Mark to market a short Eurodollar futures position with June delivery at 104.5 if daily IMM Index settlement prices are Day 1: 103.50 Day 2: 110 Day 3: 98.75 Day 4: 100 List the margin account balances at the end of each trading day and specify (i) whether an additional margin is required on any given day and, (ii) if a margin call is issued, how much must be deposited to your margin account. Assume that the initial margin is...
1. Mark to market a long Eurodollar futures position with June delivery at 93.75 if daily...
1. Mark to market a long Eurodollar futures position with June delivery at 93.75 if daily IMM Index settlement prices are Day 1: 93.90 Day 2: 93.45 Day 3: 93.24 Day 4: 93.58 Day 5: 94.00 List the margin account balances at the end of each trading day and specify (i) whether an additional margin is required on any given day and, (ii) if a margin call is issued, how much must be deposited to your margin account. Assume that...
Suppose that an investor enters a long position in futures on date 0. If the futures...
Suppose that an investor enters a long position in futures on date 0. If the futures price increases on date 1, the investor's margin account balance will increase. Group of answer choices True False
You are considering a futures position in the futures contract written on the STAR Index. This...
You are considering a futures position in the futures contract written on the STAR Index. This is an index consisting of technology stocks that specialise in inter-planetary travel, and the current index level is 18,746. Assume that is possible to short sell the index. The future value of dividends expected to be paid over the next year is $376 and the 1-year interest rate is 4%. d. It is also possible to trade in options contracts on the STAR Index....
A trader takes the long position and a hedge fund takes a short position on ten...
A trader takes the long position and a hedge fund takes a short position on ten 1-month S&P 500 futures contracts at 2500. A single S&P 500 futures contract equals ($250) × (Index Value). The initial margin is $325,000 and the maintenance margin is $245,000 for both accounts. Five trading days later, the futures price of the index drops to 2,460 triggering a margin call for the trader. What is the change margin account balance (indicate gain or loss) for:...
A trader takes the long position and a hedge fund takes a short position on ten...
A trader takes the long position and a hedge fund takes a short position on ten 1-month S&P 500 futures contracts at 2500. A single S&P 500 futures contract equals ($250) × (Index Value). The initial margin is $325,000 and the maintenance margin is $245,000 for both accounts. Five trading days later, the futures price of the index drops to 2,460 triggering a margin call for the trader. What is the change margin account balance (indicate gain or loss) for:...
1.What is the settlement price, opening price and closing price for futures? What is open interest?...
1.What is the settlement price, opening price and closing price for futures? What is open interest? 2.Why hedgers cannot achieve perfect hedging when using futures?
1. What is meant by the term "The Plural Executive" as it relates to the position...
1. What is meant by the term "The Plural Executive" as it relates to the position of Governor of California? 2. What is the line item veto? And, why and how did the California Governor acquire such power? 3. Compared to the President of the United States, the Governor of California has less visibility and public recognition. Yet, why is the Governor of California such a significant position? 4. What are more important and why, the Governor's formal or informal...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT